Yet another Marcus Robbins love story:
"Nothing would make the partners of Wynnefield Capital Inc. happier. Wynnefield is a New York investment firm that holds about 14 percent of Phoenix Gold's outstanding shares and has continually urged management to improve the company's business and promote its stock. ""
"Hedge Fund Insider Trading at SunSource
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc."
Asked whether his choice to publish an article about Phoenix Gold in the RedChip Review represented a conflict of interest, Robins pointed out that his business relationship with Phoenix Gold existed seven years ago. "That's ancient history," he said. "I would laugh in your face."
Robins also pointed out that The Business Journal ran a full-page ad from Wynnefield, promoting its proposal for cumulative voting, in the same issue that carried an article about that same proposal and Wynnefield's attempts to gain the attention of Phoenix Gold's management.
Friday, May 31, 2002
RedChip suddenly warms to Phoenix Gold tale
Portland Business Journal - by Aliza Earnshaw Business Journal Staff Writer
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After myriad complaints from its largest outside shareholder that the company was doing nothing to promote its stock, Phoenix Gold International Inc. seems at last to have succeeded in boosting the price of its stock.
Shares of car audio company Phoenix Gold (Nasdaq: PGLD), which traded as low as 95 cents and hovered mostly in the $1 to $2 range for much of the last six months, jumped suddenly to $2.66 on May 13, and has continued to trade mostly above $2.50 since then.
Trading volumes have also increased. From infrequent--often not even daily--trading levels that seldom reached 3,000 shares, PGLD has traded in much higher volumes this month, reaching as much as 29,400 shares traded in a single day.
What seems to have moved the stock up out of the Nasdaq delisting danger zone, and kept it there, is an article published May 10 in the RedChip Review, a publication providing analysis of small-cap public companies. Headlined "Up from the Ashes," the article details the company's history since its IPO in 1995, and offers an optimistic view of steps that management has taken recently to "return the company to profitability and encourage future growth."
Brian Smith, author of the article, did point out that RedChip normally does not cover companies like Phoenix Gold for several reasons. The company's market capitalization, at about $6 million when the article was written (it has since risen to about $8.7 million) falls below RedChip's threshold of $50 million. Furthermore, Phoenix Gold has a very high degree of insider ownership: between them, CEO Keith Peterson and COO Timothy Johnson hold about 68 percent of the company's 3 million outstanding shares. "A high rate of insider ownership lessens the liquidity of the stock, more than we like to see," Smith wrote.
Nonetheless, RedChip Review pointed to management having "painstakingly taken steps to revive the business;" to the undervaluation of the stock; to the company's strong cash position and lack of long-term debt; and said that the flipside of so much inside ownership is that "it is clearly in management's financial interests to witness a sustainable rebound in the company's share price."
Nothing would make the partners of Wynnefield Capital Inc. happier. Wynnefield is a New York investment firm that holds about 14 percent of Phoenix Gold's outstanding shares and has continually urged management to improve the company's business and promote its stock. "We hope the stock goes to $30, and trades 100,000 shares a day," said Nelson Obus, managing partner of Wynnefield.
What remains is the question of why RedChip Review chose to highlight Phoenix Gold, a company that "does not fall within RedChip's universe of coverage." Marc Robins, CEO of RedChip Companies LLC, which owns RedChip Review, said that he has been watching the company with interest for a number of years, since before its 1995 IPO. "They racked up 20 to 30 percent top and bottom line growth every year in the early 1990s, before they went public," Robins said.
Since then, the company has "stubbed its toe," and "survived five of its toughest years," Robins said. "Going public is a humongous big deal. Often, companies go public, drop the ball, and it takes two or three or four years for them to catch up again."
The company's troubles in a tough market for car audio may exacerbated, Robins said, by "the CEO and major shareholder going through a major lifestyle change. He wanted to be with his family and his kids."
Robins said that he helped Phoenix Gold find an underwriter for its 1995 public offering. "I thought that it was one of the most tightly run companies I'd ever seen, amazingly well run," he said. "Frank Magdlen approached me to help them find an investment banker to take them public." Magdlen, one of two outside directors of Phoenix Gold's five-member board, is a managing director of Crown Point Group Ltd., as is Edward Foehl, the other outside director of Phoenix Gold's board.
Robins also has a history with Crown Point Group Ltd., as he does with Crown Point Publishing, which used to own RedChip Review. "I started both of these, as separate companies," he said. Crown Point Publishing sold RedChip Review to RedChip.com Inc. in 1999. The company changed hands again, and now is owned by RedChip Companies LLC, which also owns RedChip Partners, RedChip Capital, and Digital Offering.
Asked whether his choice to publish an article about Phoenix Gold in the RedChip Review represented a conflict of interest, Robins pointed out that his business relationship with Phoenix Gold existed seven years ago. "That's ancient history," he said. "I would laugh in your face."
Robins also pointed out that The Business Journal ran a full-page ad from Wynnefield, promoting its proposal for cumulative voting, in the same issue that carried an article about that same proposal and Wynnefield's attempts to gain the attention of Phoenix Gold's management.
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Hedge Fund Insider Trading at SunSource
Hedge Fund Insider Trading at SunSource
The Securities and Exchange Commission filed suit on Tuesday against hedge fund manager Nelson Obus. Mr Obus manages about $400 million as founder and managing partner of Wynnefield Capital Inc.
The lawsuit filed in U.S. District Court in Manhattan claims his funds made $1.34 million after profiting from inside information provided by Peter Black, a GE Capital analyst. Black received the tip from Thomas Strickland, 33, who was an employee of GE Capital and had access to confidential documents regarding the merger.
The suit claims that with prior knowledge of the merger of Allied Capital Corp and SunSource Inc., Obus directed the purchase of 287,200 shares of SunSource stock at $4.75 on June 8, 2001, according to the SEC complaint.
In a press release yesterday to investors, Obus and Wynnefield denied the charges and called the allegations “absolutely baseless.” The letter noted Wynnefield had invested in SunSource prior to the deal and had been working with them for over ten years.
“This smacks of heavy-handed regulatory over-reaching of the type that’s been so much in the news lately,” the letter said.
“The allegations are totally baseless and we will prove that in court,” said Joel Cohen in an interview with Reuters. Mr Cohen is an attorney in New York representing Obus and the Wynnefield funds.
The SEC is seeking disgorgement of the illicit gains plus civil penalties. It also seeks to prohibit Obus and Black from serving as officers or directors of public companies. |
